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FamilyMart sues Taiwanese licensee Ting Hsin over nonpayment of royalties

FamilyMart UNY Holdings Co. Ltd. sued its chain licensee Ting Hsin International Group Co. Ltd., claiming the Taipei-based conglomerate withheld royalty payments despite its rapid expansion, Bloomberg News reported May 13, citing legal documents and people familiar with the matter.

Ting Hsin operates more than 2,500 FamilyMart stores in China, sharing profits and paying royalties to the Japanese company, pursuant to their agreement, according to the report.

FamilyMart filed a petition to a court in Cayman Islands, where Ting Hsin and their joint venture are registered, to force Ting Hsin to give up its 60% stake in the venture, Bloomberg reported. The Japanese convenience store operator also claimed that Ting Hsin sought to cut the royalty fee for the use of its brand to 0.3% or less from 1%, the report said.

Additionally, FamilyMart reportedly said in the court documents that it did not have a comprehensive account of the venture's profitability because Ting Hsin allegedly did not provide adequate disclosure of transactions related to the joint venture.

Ting Hsin argues that the royalty fees are three times higher than the average charged by rivals like Seven & i Holdings Co. Ltd.-owned 7-Eleven Inc., according to the news outlet. The Taiwanese company subsequently paid the fees, one person reportedly said.

A spokesman for FamilyMart told Bloomberg that the company "cannot comment on matters of litigation," while Ting Hsin told the news outlet that it is not commenting due to contractual confidentiality agreements.